Chapter 14 Flashcards
What were the main economic priorities in 1979?
- reduce inflation
- reduce the budget deficit
- reduce the size of the state
- reduce the power of trade unions
- discourage the market
These priorities were part of Thatcher’s economic policies aimed at transforming the British economy.
Who proposed the idea that the government should manage the economy through policies?
Keynes
John Maynard Keynes is known for his advocacy of government intervention in the economy.
What is a key belief of Friedman regarding government involvement in the economy?
Less resources in government management
Milton Friedman believed in minimal government intervention and emphasized the importance of free markets.
Fill in the blank: Friedman argued that governments should control the _______.
money supply
Controlling the money supply is a central tenet of monetarist economic theory.
What were the tax rates under Geoffrey Howe
- reduced income tax from 33% to 30%
*tax on unearned incomes 98 to 75
*higher earners 83 to 60 - vat from 8 to 12 to 15
These changes were part of Healey’s approach to taxation during his tenure.
What happened to interest rates from June 1978 to December 1978?
- increased from 12% to 17%
This spike in interest rates reflected the economic challenges of the time.
True or False: Friedman believed that government spending should be increased to stimulate the economy.
False
Friedman argued against extensive government spending as a means to boost the economy.
What is the term for the economic strategy that discourages government intervention in the market?
Monetarism
Monetarism emphasizes the role of governments in controlling the amount of money in circulation.
What does the term ‘budget deficit’ refer to?
Spending more money than coming in
A budget deficit occurs when expenses exceed revenue, leading to borrowing.
How did tax under Geoffrey Howe affect the different classes
Rich people paid less tax and poor people paid more (cost of living went up)
What is Macroeconomics?
An economic theory promoted by Milton Friedman and other Chicago school economists
What did Friedman and the Chicago school argue regarding government spending?
They argued that government spending and borrowing were key restraints on inflation
What was the state of the British economy by 1980?
The economy had plunged into a serious recession with rising unemployment
What were some monetary policies implemented in the UK during the recession?
- Government borrowing went down
- Banks denied loans
How did public spending cuts lead to issues within local councils?
Led to a series of clashes between the conservative central government and local leaders
Who was demonized as the head of the GLC?
Leaders like Ken Livingstone
What was the impact of the rate-capping policy?
Limited the amounts local councils could raise in local taxes
Lead to Sheffield and Liverpool trying to rebel by refusing to set budgets
What was a significant aspect of Thatcher’s second term?
Marked the end of the experiment with monetarism, there was not a return to demand side economics but instead more emphasis on deregulation and privatisation
What are supply-side economics focused on?
- Deregulation
- Tax cuts
- Reducing government intervention
What did demand-side economists advocate for?
- Government spending
- Keynesian principles
What was a notable economic event in the UK in 1984?
The miners’ strike
What was the trend in privatization during Thatcher’s government?
Privatization became central to the government’s economic policy
Fill in the blank: The economic theory promoted by Milton Friedman is known as _______.
monetarism
True or False: The British economy improved significantly by 1980.
False
What was a key characteristic of Thatcher’s economic reforms?
Privatization and deregulation policies
What year did the miners’ strike occur?
1984
What was a consequence of rate-capping for local councils?
Limited their ability to raise funds through local taxes
Define Keynesianism.
An economic theory advocating for increased government spending to stimulate demand
What did Thatcher’s government aim to achieve with supply-side economics?
Promote economic growth through deregulation and tax cuts
What was the looney left
Name given to the liberals who promoted liberal and polliticaly correct policies
Give examples of company’s thatcher offloaded
British petroleum October 1979
British Gas December 1986
Jaguar August 1984
British oil November 1982
What is the impact of deregulation on businesses?
Deregulation means the government intervening as little as possible, removing red tape to allow businesses to thrive.
Deregulation can lead to increased competition and innovation in the market.
What is the loan guarantee system designed for?
The loan guarantee system made it easier for small businesses to gain access to borrowing.
This system encourages entrepreneurship by reducing the financial risks for lenders.
What was the effect of the Big Bang in 1986?
The Big Bang deregulated the lending sector, opening the way for new financial institutions to emerge.
It significantly changed the landscape of financial services in the UK.
What does the term ‘curiosity’ refer to in the context of market behavior?
Curiosity refers to the price enterprises being sold at, which influences how shares are valued and perceived by employees and investors.
Increased curiosity can lead to volatility in the market.
What is a significant financial figure mentioned regarding British gas assets?
British gas assets are valued at 5.4 billion.
This valuation is important for understanding the scale of the energy sector in the UK.
Fill in the blank: The process of removing regulations to facilitate business is known as _______.
deregulation
What challenges do lenders face in the financial markets?
Lenders face challenges from the risk of defaults and market fluctuations.
These challenges can lead to tighter lending standards and reduced availability of credit.
True or False: Deregulation always leads to positive outcomes for the economy.
False
While deregulation can stimulate growth, it can also lead to increased risk and instability.
What was the primary goal of the loan guarantee system?
To facilitate access to credit for small businesses.
This helps to promote entrepreneurship and economic growth.
What does ‘precariousness’ in the workforce imply?
It implies that many employees feel insecure about their jobs and financial stability.
This can lead to decreased productivity and increased turnover.
What are the potential outcomes of curiosity-driven market behavior?
Outcomes can include increased volatility and changes in share prices.
This can affect investor confidence and market stability.
Effects of the Big Bang on the square mile
Square Mile became the most profitable place in the world
What was the enterprise allowance scheme
Encouraged the unemployed to start up Business by giving them £40 a week for up to a year to get their Business of the ground.
What impact did privatisation have on shareholders
The amount of shareholders in the uk went up from 3 million to 9 million,
What benefits did privatisation bring
Greater competition
50 billion into the treasury
British Airways and British Telecom became more efficient and profitable, expanding their workforce in later years.
Criticism of privatisation
Critics argued that private enterprise were sold of cheaply in order to ensure all shares were taken up. Job security was limited and people couldn’t rely on pensions
What model was used to justify the importance of employment?
The Keynesian model that emphasizes employment as the most important factor.
The Keynesian model focuses on total spending in the economy and its effects on output and inflation.
How do interest rates influence spending and saving?
Higher interest rates discourage borrowing and spending, leading to decreased demand.
Higher interest rates make loans more expensive, which can reduce consumer spending and business investment.
What was the unemployment rate in the UK in May 1980?
6.3
This was a peak period of unemployment during the early 1980s recession.
What were the unemployment trends in the UK during the 1980s?
Unemployment peaked at over 3 million between1983 and remained high until 1987.
Unemployment was lowest un 1979 at 1.4 million
The period was marked by significant job losses, particularly in manufacturing.
What was the unemployment rate in 1981?
9.6
This reflects the economic challenges faced during that period.
What does economic realignment refer to?
The shift of the economy away from manufacturing to a service-based economy.
This transition often involves changes in employment patterns and industry focus.
What were some effects of economic realignment on the country?
- Job losses in traditional industries
- Increased regional disparities
- Rising unemployment in specific areas
- Growth of the service sector
Economic realignment often leads to structural changes in the labor market.
What social issues were identified as components of the riots in 1981?
Scarman reported Race and poverty.
These factors contributed to social unrest and highlighted underlying societal tensions.
What positive effects did economic regeneration have?
- Investment in regeneration of deprived areas
- Development projects in cities like London
Canary Wharf became the second most profitable place.
Economic regeneration can lead to improved infrastructure and community revitalization.
Fill in the blank: The unemployment rate in 1984 was _______.
11.9
This reflects a recovery phase in the labor market.
True or False: The unemployment rate decreased steadily throughout the 1980s.
False.
The unemployment rate fluctuated and peaked before gradually decreasing.
What was the unemployment rate in 1990?
5 percent.
This indicates a significant improvement from earlier in the decade.
What was the sus law
Gave police officers permission to stop and search it was unfairly targeted and was repealed
What happened to inflation during thatchers premiership
Initially went up peaking at 22 percent in May 1980 reached a low of 3 percent in 1986 and 10.9 by the end of her term
